The Power Market Fix We’ve Been Waiting For

What good is the next great idea if the market can’t use it?

The Federal Energy Regulatory Commission’s recent two-day technical conferencediscussing distributed energy resources in wholesale markets stemmed from FERC’s recent adoption of Order 841, which directs regional markets to come up with rules for energy storage to participate in markets, but stops short of supporting other distributed energy resources in markets.

But did the rich discussion at FERC’s conference miss the best possible solution? Order 841, while outwardly addressing energy storage resources, could actually help create a universal data model for all grid resources. The traditional way of looking at generators and loads is no longer sufficient. We should take advantage of this opportunity.

A barrier to innovation nobody’s talking about

At regional transmission organizations around the country, new resources are putting pressure on existing frameworks for scheduling and dispatching resources. New characteristics must be added to create a new “participation model” and market software must be modified for almost every new technology, requiring a complicated and slow process before it can fully participate and contribute to the system.

This is an innovation barrier. Patching the existing framework with a new participation model every time a new resource that doesn’t fit the classic fuel-fired generator mold comes along can require years to develop and implement. FERC’s axiom of non-discriminatory access encourages new resource entry, yet the system itself creates an uphill climb for innovators to enter the market.

Perhaps we are having so much trouble making markets work for the wave of new grid technologies because we set up the markets with a limited view of future options. We trade energy, capacity and ancillary services that are based on the most basic capabilities of our oldest generators. What if, instead, we started with the most capable universal resource we can imagine — one that can provide, absorb and store energy at will — and then define real resources by how they differ from this idealized resource?

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This could enable markets to support a broader suite of affordable, reliable and clean technologies that already exist while supporting the grid’s continued modernization. Suddenly, heterogeneous resources fit much more easily into one model whether they are storage plants, conventional generators, renewable generators, demand response resources, DERs, or unique combinations and aggregations we haven’t even thought of yet.

Storage as a universal participation model

FERC Order 841 requires electricity markets to create an energy storage participation model that allows a resource to: “Provide all capacity, energy, and ancillary services that the resource is technically capable of providing in the [regional transmission organization/independent system operator] markets…be dispatched and set the wholesale market clearing price as both a wholesale seller and wholesale buyer…and account for the physical and operational characteristics through bidding parameters or other means.”

Done correctly, this participation model should become the “universal participation model” we need for all resources — generators, loads and even some transmission. Without it, our markets and systems become increasingly convoluted and unable to deal effectively with the resources we are building today, and even more so with the resources we come up with next.

Even today, solar-plus-storage plants, aggregated virtual power plants, or even gas-plus-storage plants face uncertainty about how to offer their capabilities to the market. What good is the next great idea if the market can’t use it?

First, what is a participation model? RTOs/ISOs have general tariff provisions that apply to all market participants. In addition, RTOs/ISOs create tariff provisions for specific types of resources when those resources have unique physical and operational characteristics or other attributes warranting distinctive treatment. These distinct tariff provisions created for a particular type of resource are participation models.

To reduce innovation barriers, we need to flip this on its head. FERC’s definition suggests that participation models are created as an exception to the general tariff case, and the general case is assumed to be a conventional generation resource, such as a traditional thermal power plant. But with electric storage resources like battery storage systems, the resource is more capable than the general case, albeit with some differences.

For example, from the grid operator’s viewpoint, conventional thermal generators are either online (and injecting some limited range of power) or offline, and the decision to get them online must be made well in advance. New resources like solar can be started or ramped almost at will, and battery storage functions with tremendous flexibility as both a generator and a load resource.

Starting with the most general and idealized conceptual resource as the general case, then turning off or adjusting the parameters of this idealized model is more logical; otherwise, we constantly work to extend a hodgepodge of tacked-on exceptions. Unavoidable implementation delays are inherently discriminatory to new innovations, and RTOs constantly operate in catchup mode, with ongoing prodding from new entrants and FERC.

In fact, if RTOs do their job as FERC requests, all other generation and load resources can be represented within the generalized storage participation model required by Order 841. The storage participation model, perhaps with slight “idealization” in its design, becomes the universal model that can be used, simply by changing appropriate parameters, for all other resources.

Getting to a universal participation model

Several major descriptor categories are needed in this universal participation model, allowing a resource to represent various capacities, ranges, rates, limits, operating constraints and operating interactions. For example, a storage resource’s capacity may be its nameplate value as either a generator or a load, and it may be able to vary real power continuously and rapidly through the full range, but it may be energy-limited. More traditional resources may have limited operating ranges, perhaps with discontinuities across various possible power values, but may be able to sustain a longer duration.

Today’s bidding parameters for conventional generators identify operating constraints such as ramp rates and minimum times for starting, running, restarting, etc. The universal model must thoughtfully generalize these operating interactions to describe capabilities for providing reliability services and ancillary services, whether or not the resource must currently provide or absorb real energy to provide the services, and the speed of such services under normal and emergency circumstances. Some of this information is static, while other parts are dynamic, based on current conditions. As a whole, the data model and associated price curves would fully represent the resource’s offer to the market in a truly comparable and objective way across all resources.

Designing the universal participation model will not be easy. It’s complicated, and it will require our smartest and most experienced data architects to get it right. Each category contains dozens of descriptors and parameters, some of them quite complex — but it is of paramount importance and entirely possible.

Anyone with a software background knows why this is so critical: get the data model wrong and software has limited capabilities. But get the data model right, and you have tremendous capabilities with flexible and elegant code. Data definitions literally change the way we solve problems. The data model affects what you can do and how you think about it.

What do we get for adopting a universal data model?

A well-designed universal data model would improve our long-term market systems and commitment/dispatch systems. If all resources are viewed as subsets of a flexible, idealized model instead of tacked-on additions to a less flexible model, the next generations of our systems can be more elegant and more capable. It should also improve our ability to think about solutions to power system needs, because it becomes easier to see how our available building blocks fit together.

For example:

We will realize that we have hundreds of ways to respond to ramps and maintain system balance and reserves.

When we need faster frequency response, we can identify all resources that can provide it and understand any interactions.

Because we can see current capabilities for all resources and conceivably know which of them have capabilities that can be adjusted, our planning process can be smarter.

Finally, this universal model could work for more than loads and generators and storage; it could also work for high-voltage DC transmission. The HVDC system terminal is an energy source behind a DC-to-AC converter, just like a large battery storage system. HVDC could participate in markets using parameters in the universal data model like those of a battery storage system, while being capable of providing a very long, and potentially infinite, sustained duration.

This creates interesting possibilities for business models and interconnections across market seams. Interregional trading could dramatically reduce the costs and risks associated with integrating large amounts of variable renewable energy, and innovative combinations of HVDC transmission with other technologies could participate through the universal model rather than as conventional transmission.

It’s time to rethink our design, so let’s start with the most capable and idealized participation model imaginable, then represent all real-world resources as subsets of that idealized case. Flexible battery storage is arguably the closest example to that idealized resource we have today. Other generators and loads can be represented by varying parameters in this data model.

This model’s elegance could change the way that we think about resources, and it would allow market operation in a technology-neutral, economic and nondiscriminatory way. Done right, it would largely eliminate the need for new programming (or new FERC orders like Order 841) when new technologies or novel combinations of technologies emerge.

FERC is requiring RTOs to develop a new model for electric storage resources, so let’s take advantage of this rare opportunity to rethink how we look at all resources.